A federal judge has ruled that the partners behind the rejected TrumpStreet casino project can move forward with a lawsuit against Pennsylvania's gaming board alleging discrimination against the project for its ties to Atlantic City.

U.S. District Judge John E. Jones III on Wednesday issued a 67-page ruling that allowed Keystone Development Partners to proceed with its case against the Pennsylvania Gaming Control Board.

Keystone, which sued last December, alleges that the board practiced a form of illegal protectionism by favoring companies without Atlantic City casinos.

In 2006, the board rejected the Keystone project, which would have used the old Budd industrial site in Nicetown and East Falls, and said it feared the casino would have been used for tax reasons to funnel patrons to Atlantic City.

"Bottom line is that we won in federal court," said Larry Ceisler, spokesman for the Keystone investors. "Our litigation can continue, and the board is subject to discovery and deposition."

The investors include Donald Trump, Trump Entertainment Resorts, former Sixers president Pat Croce, restaurateur Pete Ciarrocchi, and Brian P. Tierney, chief executive officer of Philadelphia Media Holdings, which owns The Inquirer, the Philadelphia Daily News, and Philly.com.

Doug Sherman, the gaming board's chief counsel, said the board was pleased that the court had dismissed part of the lawsuit, but disappointed that the remainder of the suit had not been thrown out.

The dismissed counts involved future damages to Keystone that the judge agreed were too speculative. He also declined to interpret a part of the state Gaming Act that allows the board to deny applicants if they are involved in litigation against the board.

The judge agreed to allow the suit to go forward on alleged harm caused by the board in its rejection of the TrumpStreet project. He also declined to grant full immunity to board members who were involved in that decision.

HSP Gaming, owner of the SugarHouse Casino under construction on the Northern Liberties-Fishtown border, joined the lawsuit in support of the board. It alleged that Trump had gone to court to further delay the building of casinos in Philadelphia because of financial troubles in Atlantic City.

Yesterday, a spokeswoman for SugarHouse declined comment on the court ruling.

Trump Entertainment Resorts Inc. filed for Chapter 11 bankruptcy in February. Donald Trump tried to regain control of his three Atlantic City casinos for most of the year, but ceded control to creditors last month. The creditors had made a higher offer for the casino firm than he and his daughter, Ivanka Trump, made. An agreement reached by the two sides provides that the three Atlantic City casinos will still bear the Trump name.

Contact staff writer Robert Moran at 215-854-5983 or bmoran@phillynews.com.

Inquirer staff writer Suzette Parmley contributed to this article.